UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D. C. 20549
 
 FORM
10-Q
 
 x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
ACT OF 1934
 For the
quarterly period ended June 30, 2010
  ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
ACT OF 1934
 For the
transition period from __________ to __________
 
 Commission
File Number 000-32585
 
 SUNRISE
REAL ESTATE GROUP, INC.
 
 (Exact
name of registrant as specified in its charter)
 
 Texas
                      
                      75-2713701(State
      or other jurisdiction of
                        incorporation
      or organization)
                      
                      (I.R.S.
      Employer Identification
No.)
 
 Suite
701, No. 333, Zhaojiabang Road
 Shanghai,
PRC 200032
 (Address
of principal executive offices  Zip Code)
 
 Registrant’s
telephone number: + 86-21-6422-0505
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No  ̈
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
 Large
      accelerated filer  ̈
                Accelerated
      filer  ̈Non-accelerated
      filer  ̈
                Smaller
      reporting company x
 
 Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act): Yes  ̈ No x
 
 Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: August 10, 2010 - 23,691,925 shares of
Common Stock
  
  FORM
10-Q
  For
the Quarter Ended June 30, 2010
  INDEX
 PagePART
      I. FINANCIAL INFORMATION
                  3Item
      1.    Financial Statements
                  3Consolidated
      Balance Sheets
                  3Consolidated
      Statements of Operations
                  4Consolidated
      Statements of Cash Flows
                  5Item
      2.    Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
                  16Item
      3.    Quantitative and Qualitative Disclosures About Market
      Risk
                  24Item
      4.    Controls and Procedures
                  24PART
      II. OTHER INFORMATION
                  25Item
      1.    Legal Proceedings
                  25Item
      2.    Unregistered Sales of Equity Securities and Use of
      Proceeds
                  25Item
      3.    Defaults Upon Senior Securities
                  25Item
      4.    (Removed and Reserved)
                  25Item
      5.    Other Information
                  25Item
      6.    Exhibits
                  25SIGNATURES
                  25
  2
  PART
I - FINANCIAL INFORMATION
 ITEM
1.  FINANCIAL STATEMENTS
 
 Sunrise
Real Estate Group, Inc.
 Unaudited
Condensed Consolidated Balance Sheets
 (Expressed
in US Dollars)
 June 30,
                          
                          
                          December 31,2010
                          
                          
                          2009(Unaudited)
                          
                          
                          (Audited)ASSETSCurrent
      assetsCash
      and cash equivalents
                          
                          $
                          2,295,101
                          
                          
                          $
                          3,444,600Accounts
      receivable
                          
                          
                          1,522,705
                          
                          
                          
                          651,329Promissory
      deposits (Note 3)
                          
                          
                          1,178,047
                          
                          
                          
                          732,257Other
      receivables and deposits (Note 4)
                          
                          
                          669,057
                          
                          
                          
                          177,001Total
      current assets
                          
                          
                          5,664,910
                          
                          
                          
                          5,005,187Property,
      plant and equipment – net (Note 5)
                          
                          
                          2,592,512
                          
                          
                          
                          2,291,995Investment
      properties (Note 6)
                          
                          
                          7,334,397
                          
                          
                          
                          7,597,074Total
      assets
                          
                          $
                          15,591,819
                          
                          
                          $
                          14,894,256LIABILITIES
      AND SHAREHOLDERS’ DEFICITCurrent
      liabilitiesBank
      loans (Note 7)
                          
                          $
                          -
                          
                          
                          $
                          205,032Promissory
      notes payable (Note 8)
                          
                          
                          892,774
                          
                          
                          
                          1,036,119Accounts
      payable
                          
                          
                          285,391
                          
                          
                          
                          316,064Amount
      due to directors (Note 9)
                          
                          
                          166,087
                          
                          
                          
                          290,210Amount
      due to related party (Note 9)
                          
                          
                          128,699
                          
                          
                          
                          127,996Other
      payables and accrued expenses (Note 10)
                          
                          
                          2,761,998
                          
                          
                          
                          2,283,359Other
      tax payable (Note 11)
                          
                          
                          267,682
                          
                          
                          
                          384,290Income
      tax payable
                          
                          
                          1,112,677
                          
                          
                          
                          987,187Total
      current liabilities
                          
                          
                          5,615,308
                          
                          
                          
                          5,630,257Long-term
      bank loans (Note 7)
                          
                          
                          8,099,074
                          
                          
                          
                          8,054,831Deposits
      received from underwriting sales (Note 13)
                          
                          
                          3,788,793
                          
                          
                          
                          4,316,655Deferred
      tax liabilities
                          
                          
                          330,075
                          
                          
                          
                          -Total
      liabilities
                          
                          $
                          17,833,250
                          
                          
                          $
                          18,001,743Noncontrolling
      interests of consolidated subsidiaries
                          
                          
                          1,081,086
                          
                          
                          
                          636,881Commitments
      and contingencies (Note 12)Shareholders’
      deficitCommon
      stock, par value $0.01 per share; 200,000,000 shares authorized;
      23,691,925 shares issued and outstanding as of June 30, 2010 and December
      31, 2009
                          
                          
                          236,919
                          
                          
                          
                          236,919Additional
      paid-in capital
                          
                          
                          3,620,008
                          
                          
                          
                          3,620,008Statutory
      reserve (Note 14)
                          
                          
                          758,070
                          
                          
                          
                          759,855Accumulated
      losses
                          
                          
                          (8,526,107
                          )
                          
                          
                          (9,023,506
                          )Accumulated
      other comprehensive income (Note 15)
                          
                          
                          588,593
                          
                          
                          
                          662,356Total
      shareholders’ deficit
                          
                          
                          (3,322,517
                          )
                          
                          
                          (3,744,368
                          )Total
      liabilities and shareholders’ deficit
                          
                          $
                          15,591,819
                          
                          
                          $
                          14,894,256
 
 See
accompanying notes to consolidated financial statements.
  3
  Sunrise
Real Estate Group, Inc.
 
 Unaudited Condensed
Consolidated Statements of Operations
 
 (Expressed
in US Dollars)
 Three Months Ending June 30,
                                    
                                    
                                    Six Months Ending June 30,2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010
                                    
                                    
                                    2009(Unaudited)
                                    
                                    
                                    (Unaudited)
                                    
                                    
                                    (Unaudited)
                                    
                                    
                                    (Unaudited)Net
      Revenues
                                    
                                    $
                                    2,942,915
                                    
                                    
                                    $
                                    1,759,981
                                    
                                    
                                    $
                                    7,642,434
                                    
                                    
                                    $
                                    3,255,509Cost
      of Revenues
                                    
                                    
                                    (2,106,356
                                    )
                                    
                                    
                                    (1,076,930
                                    )
                                    
                                    
                                    (4,123,068
                                    )
                                    
                                    
                                    (2,307,201
                                    )Gross
      Profit
                                    
                                    
                                    836,559
                                    
                                    
                                    
                                    683,051
                                    
                                    
                                    
                                    3,519,366
                                    
                                    
                                    
                                    948,308Operating
      Expenses
                                    
                                    
                                    (293,090
                                    )
                                    
                                    
                                    (267,871
                                    )
                                    
                                    
                                    (661,607
                                    )
                                    
                                    
                                    (459,511
                                    )General
      and Administrative Expenses
                                    
                                    
                                    (532,981
                                    )
                                    
                                    
                                    (597,260
                                    )
                                    
                                    
                                    (1,115,343
                                    )
                                    
                                    
                                    (1,078,815
                                    )Operating
      Profit/(Loss)
                                    
                                    
                                    10,488
                                    
                                    
                                    
                                    (182,080
                                    )
                                    
                                    
                                    1,742,416
                                    
                                    
                                    
                                    (590,018
                                    )Interest
      Income
                                    
                                    
                                    2,132
                                    
                                    
                                    
                                    730
                                    
                                    
                                    
                                    5,115
                                    
                                    
                                    
                                    1,629Other
      Income, Net
                                    
                                    
                                    (22,531
                                    )
                                    
                                    
                                    7,604
                                    
                                    
                                    
                                    (5,597
                                    )
                                    
                                    
                                    22,217Interest
      Expenses
                                    
                                    
                                    (157,604
                                    )
                                    
                                    
                                    (122,139
                                    )
                                    
                                    
                                    (306,107
                                    )
                                    
                                    
                                    (266,513
                                    )Profit/(Loss)
      Before Income Tax and Minority Interest
                                    
                                    
                                    (167,515
                                    )
                                    
                                    
                                    (295,885
                                    )
                                    
                                    
                                    1,435,827
                                    
                                    
                                    
                                    (832,685
                                    )Income
      Tax
                                    
                                    
                                    (527,169
                                    )
                                    
                                    
                                    (14,271
                                    )
                                    
                                    
                                    (550,298
                                    )
                                    
                                    
                                    (23,040
                                    )Profit/(Loss)
      Before Minority Interest
                                    
                                    
                                    (694,684
                                    )
                                    
                                    
                                    (310,156
                                    )
                                    
                                    
                                    885,529
                                    
                                    
                                    
                                    (855,725
                                    )Minority
      Interest
                                    
                                    
                                    187,764
                                    
                                    
                                    
                                    (62,403
                                    )
                                    
                                    
                                    (368,332
                                    )
                                    
                                    
                                    285Net
      Profit/(Loss)
                                    
                                    $
                                    (506,920
                                    )
                                    
                                    $
                                    (372,559
                                    )
                                    
                                    $
                                    517,197
                                    
                                    
                                    $
                                    (855,440
                                    )Profit/(Loss)
      Per Share – Basic and Fully Diluted
                                    
                                    $
                                    (0.02
                                    )
                                    
                                    $
                                    (0.02
                                    )
                                    
                                    $
                                    0.02
                                    
                                    
                                    $
                                    (0.04
                                    )Weighted
      average common shares outstanding
                                      –
      Basic and Fully Diluted
                                    
                                    
                                    23,691,925
                                    
                                    
                                    
                                    23,691,925
                                    
                                    
                                    
                                    23,691,925
                                    
                                    
                                    
                                    23,691,925
  See
accompanying notes to unaudited condensed consolidated financial
statements.
  4
 
 Sunrise
Real Estate Group, Inc.
 
 Consolidated
Statements of Cash Flows
 Increase/(Decrease)
in Cash and Cash Equivalents
 
 (Expressed
in US Dollars)
 Six Months Ending June 30,2010
                                      
                                      
                                      2009(Unaudited)
                                      
                                      
                                      (Unaudited)Cash
      flows from operating activitiesNet
      Profit/(Loss)
                                      
                                      $
                                      517,197
                                      
                                      
                                      $
                                      (855,440
                                      )Adjustments
      to reconcile net income tonet cash used in operating
      activitiesDepreciation
      of property, plant and equipment
                                      
                                      
                                      422,518
                                      
                                      
                                      
                                      429,783Loss/
      (Gain) on disposal of property, plant and equipment
                                      
                                      
                                      741
                                      
                                      
                                      
                                      113,027Minority
      interest
                                      
                                      
                                      368,332
                                      
                                      
                                      
                                      (92
                                      )Change
      in:Accounts
      receivable
                                      
                                      
                                      (863,855
                                      )
                                      
                                      
                                      (55,343
                                      )Promissory
      deposits
                                      
                                      
                                      (439,760
                                      )
                                      
                                      
                                      171,025Other
      receivables and deposits
                                      
                                      
                                      (488,852
                                      )
                                      
                                      
                                      (76,188
                                      )Accounts
      payable
                                      
                                      
                                      (32,262
                                      )
                                      
                                      
                                      688,298Other
      payables and accrued expenses
                                      
                                      
                                      463,979
                                      
                                      
                                      
                                      (552,891
                                      )Deposit
      from underwriting sales
                                      
                                      
                                      (549,065
                                      )
                                      
                                      
                                      -Interest
      payable on promissory notes
                                      
                                      
                                      (24,897
                                      )
                                      
                                      
                                      106,896Interest
      payable on amount due to director
                                      
                                      
                                      1,220
                                      
                                      
                                      
                                      146,183Amount
      due to related party
                                      
                                      
                                      -
                                      
                                      
                                      
                                      42,615Deferred
      tax liabilities
                                      
                                      
                                      328,575
                                      
                                      
                                      
                                      -Other
      tax payable
                                      
                                      
                                      (210,396
                                      )
                                      
                                      
                                      (39,707
                                      )Income
      tax payable
                                      
                                      
                                      119,522
                                      
                                      
                                      
                                      (26,515
                                      )Restricted
      cash
                                      
                                      
                                      -
                                      
                                      
                                      
                                      19,634Net
      cash provided by/(used in) operating activities
                                      
                                      
                                      (387,003
                                      )
                                      
                                      
                                      111,285Cash
      flows from investing activitiesAcquisition
      of property, plant and equipment
                                      
                                      
                                      (435,308
                                      )
                                      
                                      
                                      (2,415
                                      )Proceeds
      from disposal of plant and equipment
                                      
                                      
                                      4,529
                                      
                                      
                                      
                                      18,292Net
      cash provided by/(used in) investing activities
                                      
                                      
                                      (430,779
                                      )
                                      
                                      
                                      15,877Cash
      flows from financing activitiesBank
      loans repayment
                                      
                                      
                                      (205,221
                                      )
                                      
                                      
                                      (102,434
                                      )Repayment
      of promissory note
                                      
                                      
                                      (143,345
                                      )
                                      
                                      
                                      (44,444
                                      )Proceeds
      from promissory note
                                      
                                      
                                      -
                                      
                                      
                                      
                                      146,334Repayment
      to director
                                      
                                      
                                      (125,514
                                      )
                                      
                                      
                                      (64,889
                                      )Advance
      from director
                                      
                                      
                                      -
                                      
                                      
                                      
                                      160,882Net
      cash provided by/ (used in) financing activities
                                      
                                      
                                      (474,080
                                      )
                                      
                                      
                                      95,449Effect
      of exchange rate changes on cash and cash equivalents
                                      
                                      
                                      142,363
                                      
                                      
                                      
                                      (295,713
                                      )Net
      decrease in cash and cash equivalents
                                      
                                      
                                      (1,149,499
                                      )
                                      
                                      
                                      (73,102
                                      )Cash
      and cash equivalents at beginning of period
                                      
                                      
                                      3,444,600
                                      
                                      
                                      
                                      587,468Cash
      and cash equivalents at end of period
                                      
                                      $
                                      2,295,101
                                      
                                      
                                      $
                                      514,366Supplemental
      disclosure of cash flow informationCash
      paid during the period:Income
      tax paid
                                      
                                      
                                      96,233
                                      
                                      
                                      
                                      49,134Interest
      paid
                                      
                                      
                                      329,785
                                      
                                      
                                      
                                      297,528
 
 See
accompanying notes to unaudited condensed consolidated financial
statements.
  5
  NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 (Expressed
in US Dollars)
 
 NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
 
 Sunrise
Real Estate Development Group, Inc. (“CY-SRRE”) was established in the Cayman
Islands on April 30, 2004 as a limited liability company. CY-SRRE was wholly
owned by Ace Develop Properties Limited, a corporation, (“Ace Develop”), of
which Lin Chi-Jung, an individual, is the principal and controlling shareholder.
Shanghai Xin Ji Yang Real Estate Consultation Company Limited (“SHXJY”) was
established in the People’s Republic of China (the “PRC”) on August 14, 2001 as
a limited liability company.  SHXJY was originally owned by a
Taiwanese company, of which the principal and controlling shareholder was Lin
Chi-Jung. On June 8, 2004, all the fully paid up capital of SHXJY was
transferred to CY-SRRE. On June 25, 2004 SHXJY and two individuals established a
subsidiary, namely, Suzhou Xin Ji Yang Real Estate Consultation Company Limited
(“SZXJY”) in the PRC, at which point in time, SHXJY held a 90% equity interest
in SZXJY. On December 24, 2004, SHXJY acquired 85% of equity interest in Beijing
Xin Ji Yang Real Estate Consultation Company Limited (“BJXJY”), a PRC company
incorporated on April 16, 2003 with limited liability.  On August 9,
2005, SHXJY sold a 10% equity interest in SZXJY to a company owned by a director
of SZXJY, and transferred a 5% equity interest in SZXJY to
CY-SRRE.  Following the disposal and the transfer, CY-SRRE effectively
held an 80% equity interest in SZXJY. On November 24, 2006, CY-SRRE, SHXJY, a
director of SZXJY and a third party established a subsidiary, namely, Suzhou
Shang Yang Real Estate Consultation Company Limited (“SZSY”) in the PRC, with
CY-SRRE holding a 12.5% equity interest, SHXJY holding a 26% equity interest and
the director of SZXJY holding a 12.5% equity interest in SZSY. At the date of
incorporation, SRRE and the director of SZXJY entered into a voting agreement
that SRRE is entitled to exercise the voting right in respect of his 12.5%
equity interest in SZSY. Following that, SRRE effectively holds 51% equity
interest in SZSY. On September 24, 2007, CY-SRRE sold a 5% equity interest in
SZXJY to a company owned by a director of SZXJY.  Following the
disposal, CY-SRRE effectively holds 75% equity interest in SZXJY.  On
November 1, 2007, SZXJY established a wholly owned subsidiary, Suzhou Xin Ji
Yang Real Estate Brokerage Company Limited (“SZXJYB”) in the PRC as a limited
liability company.  On May 8, 2008, SHXJY established a wholly owned
subsidiary, Kunshan Shang Yang Real Estate Brokerage Company Limited (“KSSY”) in
the PRC as a limited liability company.
 
 LIN RAY
YANG Enterprise Ltd. (“LRY”) was established in the British Virgin Islands on
November 13, 2003 as a limited liability company.  LRY was owned by
Ace Develop, Planet Technology Corporation (“Planet Tech”) and Systems &
Technology Corporation (“Systems Tech”).  On February 5, 2004, LRY
established a wholly owned subsidiary, Shanghai Shang Yang Real Estate
Consultation Company Limited (“SHSY”) in the PRC as a limited liability company.
On January 10, 2005, LRY and a PRC third party established a subsidiary, Suzhou
Gao Feng Hui Property Management Company Limited (“SZGFH”), in the PRC, with LRY
holding 80% of the equity interest in SZGFH. On May 8, 2006, LRY acquired 20% of
the equity interest in SZGFH from the third party. Following the acquisition,
LRY effectively holds 100% of the equity interest in SZGFH. On September 11,
2007 SHSY and other third parties established a subsidiary, namely, Suzhou Bin
Fen Nian Dai Administration Consultancy Company Limited (“SZBFND”) in the PRC,
with SHSY holding a 19% equity interest in SZBFND. On September 18, 2008, SHSY
established a wholly owned subsidiary, San Ya Shang Yang Real Estate
Consultation Company Limited (“SYSY”) in the PRC as a limited liability
company.
 
 SHXJY,
SZXJY, BJXJY, SHSY, SZGFH, SZSY, SZXJYB, KSSY and SYSY commenced operations in
November 2001, June 2004, January 2004, February 2004, January 2005, November
2006, November 2007, May 2008 and September 2008 respectively.  Each
of SHXJY, SZXJY, BJXJY, SHSY, SZGFH, SZSY, SZXJYB and KSSY has been granted a
twenty-year operation period and SYSY has been granted a thirty-year operation
period from the PRC, which can be extended with approvals from relevant PRC
authorities.
 
 On August
31, 2004, Sunrise Real Estate Group, Inc. (“SRRE”), CY-SRRE and Lin Chi-Jung, an
individual and agent for the beneficial shareholder of CY-SRRE, i.e., Ace
Develop, entered into an exchange agreement under which SRRE issued 5,000,000
shares of common stock to the beneficial shareholder or its designees, in
exchange for all outstanding capital stock of CY-SRRE.  The
transaction closed on October 5, 2004.  Lin Chi-Jung is Chairman of
the Board of Directors of SRRE, the President of CY-SRRE and the principal and
controlling shareholder of Ace Develop.
  6
 
 Also on
August 31, 2004, SRRE, LRY and Lin Chi-Jung, an individual and agent for
beneficial shareholders of LRY, i.e., Ace Develop, Planet Tech and Systems Tech,
entered into an exchange agreement under which SRRE issued 10,000,000 shares of
common stock to the beneficial shareholders, or their designees, in exchange for
all outstanding capital stock of LRY.  The transaction was closed on
October 5, 2004. Lin Chi-Jung is Chairman of the Board of Directors of SRRE, the
President of LRY and the principal and controlling shareholder of Ace
Develop.  Regarding the 10,000,000 shares of common stock of SRRE
issued in this transaction, SRRE issued 8,500,000 shares to Ace Develop, 750,000
shares to Planet Tech and 750,000 shares to Systems Tech.
 
 As a
result of the acquisition, the former owners of CY-SRRE and LRY hold a majority
interest in the combined entity.  Generally accepted accounting
principles require in certain circumstances that a company whose shareholders
retain the majority voting interest in the combined business be treated as the
acquirer for financial reporting purposes.  Accordingly, the
acquisition has been accounted for as a “reverse acquisition” arrangement
whereby CY-SRRE and LRY are deemed to have purchased SRRE.  However,
SRRE remains the legal entity and the Registrant for Securities and Exchange
Commission reporting purposes.  All shares and per share data prior to
the acquisition have been restated to reflect the stock issuance as a
recapitalization of CY-SRRE and LRY.
 
 SRRE was
initially incorporated in Texas on October 10, 1996, under the name of Parallax
Entertainment, Inc. (“Parallax”).  On December 12, 2003, Parallax
changed its name to Sunrise Real Estate Development Group, Inc.  On
April 25, 2006, Sunrise Estate Development Group, Inc. filed Articles of
Amendment with the Texas Secretary of State, changing the name of Sunrise Real
Estate Development Group, Inc. to Sunrise Real Estate Group, Inc., effective
from May 23, 2006.
 
 On April
22, 2010, ACE Develop Properties Limited, whose sole beneficiary owner is Lin
Chi Jung, Chairman of the Board, CEO and director of the Company, transferred
4,511,400 shares of common stock of the Company to Robert Lin Investment, Inc.
whose sole beneficiary owner is Lin Chao Chin, President, COO and director of
the Company.
 
 Figure 1:
Company Organization Chart
 
 
  7
 
 SRRE and
its subsidiaries, namely, CY-SRRE, LRY, SHXJY, SZXJY, SZXJYB, SZSY, KSSY, BJXJY,
SHSY, SZGFH and SYSY are sometimes hereinafter collectively referred to as “the
Company.”
 
 The principal activities of the Company
are property brokerage services, real estate marketing services, property
leasing services and property management services in the
PRC.
 
 NOTE
2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis
of Accounting and Principles of Consolidation
 
 The
consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America that include the
financial statements of SRRE and its subsidiaries, CY-SRRE, LRY, SHXJY, SZXJY,
SZXJYB, SZSY, KSSY, BJXJY, SHSY, SZGFH and SYSY.  All inter-company
transactions and balances have been eliminated.
 
 Use
of Estimates
 
 The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.  Actual
results could differ from those estimates.
 
 Cash
and Cash Equivalents
 
 Cash and
cash equivalents include cash in hand and all highly liquid investments with an
original maturity of three months or less.
 
 Foreign
Currency Translation and Transactions
 
 The
functional currency of SRRE, CY-SRRE and LRY is United States Dollars (“US$”)
and the financial records are maintained and the financial statements prepared
in US $. The functional currency of SHXJY, SZXJY, SZXJYB, SZSY, KSSY, BJXJY,
SHSY, SZGFH and SYSY is Renminbi (“RMB”) and the financial records are
maintained and the financial statements prepared in RMB.
 
 Foreign
currency transactions during the period are translated into each company’s
denominated currency at the exchange rates ruling at the transaction dates. Gain
and loss resulting from foreign currency transactions are included in the
consolidated statement of operations. Assets and liabilities denominated in
foreign currencies at the balance sheet date are translated into each company’s
denominated currency at period end exchange rates.  All exchange
differences are dealt with in the consolidated statements of
operations.
 
 The
financial statements of the Company’s operations based outside of the United
States have been translated into US$ in accordance with Accounting Standards
Codification (ASC) Topic 830 “Foreign Currency Matters”.  Management
has determined that the functional currency for each of the Company’s foreign
operations is its applicable local currency.  When translating
functional currency financial statements into US$, period-end exchange rates are
applied to the consolidated balance sheets, while average period rates are
applied to consolidated statements of operations.  Translation gains
and losses are recorded in translation reserve as a component of shareholders’
equity.
 
 The
exchange rate between US$ and RMB had some fluctuation during the periods
presented. The rates as of June 30, 2010 and December 31, 2009 are US$1:
RMB6.7909 and US$1: RMB6.8282, respectively.
  8
 
 Property,
Plant, Equipment and Depreciation
 
 Property,
plant and equipment are stated at cost. Depreciation is computed using the
straight-line method to allocate the cost of depreciable assets over the
estimated useful lives of the assets as follows:
 
 Estimated
      Useful Life (in years)Furniture
      and fixtures
                5-10Computer
      and office equipment
                5Motor
      vehicles
                5Properties
                20
 
 Maintenance,
repairs and minor renewals are charged directly to the statement of operations
as incurred. Additions and improvements are capitalized. When assets are
disposed of, the related cost and accumulated depreciation thereon are removed
from the accounts and any resulting gain or loss is included in the statement of
operations.
 
 Investment
property
 
 Investment
properties are stated at cost. Depreciation is computed using the straight-line
method to allocate the cost of depreciable assets over the estimated useful
lives of 20 years.
 
 Significant
additions that extend property lives are capitalized and are depreciated over
their respective estimated useful lives. Routine maintenance and repair costs
are expensed as incurred. The Company reviews its investment property for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an investment property may not be recoverable.
 
 Revenue
Recognition
 
 Agency
commission revenue from property brokerage is recognized when the property
developer and the buyer complete a property sales transaction, and the property
developer grants confirmation to us to be able to invoice them accordingly. The
time when we receive the commission is normally at the time when the property
developer receives from the buyer a portion of the sales proceeds in accordance
with the terms of the relevant property sales agreement, or the balance of the
bank loan to the buyer has been funded, or recognized under the sales schedule
or other specific items of agency sales agreement with developer. At no point
does the Company handle any monetary transactions nor act as an escrow
intermediary between the developer and the buyer.
 
 Revenue
from marketing consultancy services is recognized when services are provided to
clients, fees associated to services are fixed or determinable, and collection
of the fees is assured.
 
 Rental
revenue from property management and rental business is recognized on a
straight-line basis according to the time pattern of the leasing
agreements.
 
 The
Company accounts for underwriting sales in accordance with the FASB guidance of
ASC Topic 360, “Property, Plant and Equipment”. The commission revenue on
underwriting sales is recognized when the criteria in ASC 360 have been met,
generally when title is transferred and the Company no longer has substantial
continuing involvement with the real estate asset sold. If the Company provides
certain rent guarantees or other forms of support where the maximum exposure to
loss exceeds the gain, it defers the related commission income and expenses by
applying the deposit method. In future periods, the commission income and
related expenses are recognized when the remaining maximum exposure to loss is
reduced below the amount of income deferred.
 
 All
revenues represent gross revenues less sales and business tax.
 
 Net
Earnings per Common Share
 
 The
Company computes net earnings per share in accordance with the FASB guidance of
ASC Topic 260, “Earnings per Share.”  Under the provisions of ASC
Topic 260, basic net earnings per share is computed by dividing the net earnings
available to common shareholders for the period by the weighted average number
of shares of common stock outstanding during the period. The calculation of
diluted net earnings per share recognizes common stock equivalents, however;
potential common stock in the diluted EPS computation is excluded in net loss
periods, as their effect is anti-dilutive.
  9
 
 Income
Taxes
 
 The
Company accounts for income taxes in accordance with the FASB ASC Topic 740
“Income Taxes.” Under ASC Topic 740, deferred tax liabilities or assets at the
end of each period are determined using the tax rate expected to be in effect
when taxes are actually paid or recovered. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.
 
 We
continue to account for income taxcontingencies using a
benefit recognition model.Beginning January 1,
2007, if we considered that a tax position is 'more likely than not' of being
sustained upon audit, based solely on the technical merits of the position, we
recognize the benefit. We measure the benefit by determining the amount that is
greater than 50% likely of being realized upon settlement, presuming that the
tax position is examined by the appropriate taxing authority that has full
knowledge of all relevant information. These assessments can be complex and we
often obtain assistance from external advisors.
 
 Under the
benefit recognition model, if our initial assessment fails to result in the
recognition of a tax benefit, we regularly monitor our position and subsequently
recognize the tax benefit if there are changes in tax law or analogous case law
that sufficiently raise the likelihood of prevailing on the technical merits of
the position to more likely than not; if the statute of limitations expires; or
if there is a completion of an audit resulting in a settlement of that tax year
with the appropriate agency.
 
 Uncertain
tax positions, represented by liabilities on our balance sheet, are now
classified as current only when we expect to pay cash within the next 12 months.
Interest and penalties, if any, continue to be recorded in Provision for taxes
on income and are classified on the balance sheet with the related tax
liability.
 
 Historically,
our policy had been to account for income tax contingencies based on whether we
determined our tax position to be 'probable' under current tax law of being
sustained, as well as an analysis of potential outcomes under a given set of
facts and circumstances. In addition, we previously considered all tax
liabilities as current once the associated tax year was under
audit.
 
 Segment
information
 
 The
Company believes that it operates in one business segment. Management views the
business as consisting of several revenue streams; however it is not possible to
attribute assets or indirect costs to the individual streams other than direct
expenses.
 
 Recently
Issued Accounting Guidance
 
 In
January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires new disclosures on the transfers of assets and liabilities between
Level 1 (quoted prices in active market for identical assets or liabilities) and
Level 2 (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the
transfers. Additionally, the guidance requires a roll forward of activities
on purchases, sales, issuance, and settlements of the assets and liabilities
measured using significant unobservable inputs (Level 3 fair value
measurements). The guidance became effective for us with the reporting period
beginning January 1, 2010, except for the disclosure on the roll forward
activities for Level 3 fair value measurements, which will become effective for
us with the reporting period beginning July 1, 2011. Other than requiring
additional disclosures, adoption of this new guidance did not have a material
impact on our financial statements.
 
 We
adopted guidance issued by the FASB that changes the accounting and reporting
for non-controlling interests. Non-controlling interests are to be reported as a
component of equity separate from the parent’s equity, and purchases or sales of
equity interests that do not result in a change in control are to be accounted
for as equity transactions. In addition, net income attributable to a
non-controlling interest is to be included in net income and, upon a loss of
control, the interest sold, as well as any interest retained, is to be recorded
at fair value with any gain or loss recognized in net income. Adoption of the
new guidance did not have a material impact on our financial
statements.
  In June
2009, the FASB issued guidance on the consolidation of variable interest
entities, which is effective for us beginning July 1, 2010. The new
guidance requires revised evaluations of whether entities represent variable
interest entities, ongoing assessments of control over such entities, and
additional disclosures for variable interests. We believe adoption of this new
guidance will not have a material impact on our financial
statements.
  10
  In May
2009, the FASB Issued guidance on accounting for and disclosure of subsequent
events. The objective of this guidance is to establish general standards of
accounting and disclosure of events after the balance sheet date but before
financial statements are issued or are available to be issued.
 
 The
Company does not anticipate that adoption of the above guidance will have a
material effect on the Company’s financial condition and results of
operations.
 
 NOTE
3 - PROMISSORY DEPOSITS
 
 The
balance of $736,279 represents the deposits placed with several property
developers in respect of a number of real estate projects where the Company is
appointed as sales agent.
 
 The
balance of $441,767 represents the deposit for participating in a land auction
in SanDong, the PRC.
 
 As of
June 30, 2010, $441,767 out of the total promissory deposits was pledged to
secure a promissory note payable in Note 8.
 
 NOTE
4 - OTHER RECEIVABLES AND DEPOSITS
 
 June 30,
                                    
                                    
                                    December 31,2010
                                    
                                    
                                    2009Advances
      to staff
                                    
                                    $
                                    39,612
                                    
                                    
                                    $
                                    80,288Rental
      deposits
                                    
                                    
                                    152,346
                                    
                                    
                                    
                                    72,870Other
      receivables
                                    
                                    
                                    477,099
                                    
                                    
                                    
                                    23,843$
                                    669,057
                                    
                                    
                                    $
                                    177,001
  NOTE5–PROPERTY, PLANT AND
EQUIPMENT – NET
   June 30,
                      
                      
                      December 31,2010
                      
                      
                      2009Furniture
      and fixtures
                      
                      $
                      81,383
                      
                      
                      $
                      80,938Computer
      and office equipment
                      
                      
                      359,958
                      
                      
                      
                      349,964Motor
      vehicles
                      
                      
                      792,256
                      
                      
                      
                      491,799Properties
                      
                      
                      2,226,702
                      
                      
                      
                      2,214,5393,460,299
                      
                      
                      
                      3,137,240Less:
      Accumulated depreciation
                      
                      
                      (867,787
                      )
                      
                      
                      (845,245
                      )$
                      2,592,512
                      
                      
                      $
                      2,291,995
  11
 
 NOTE
6 – INVESTMENT PROPERTIES
 
 June
      30,
                  
                  
                  December
      31,2010
                  
                  
                  2009Investment
      property
                  
                  $
                  9,118,206
                  
                  
                  $
                  9,068,396Less:
      Accumulated depreciation
                  
                  
                  (1,783,809
                  )
                  
                  
                  (1,471,322
                  )$
                  7,334,397
                  
                  
                  $
                  7,597,074
 
 The
investment properties include one floor and four units of a commercial building
in Suzhou, the PRC. The investment properties were acquired by the Company for
long-term investment purposes and were pledged to secure a bank loan in note 7.
The carrying amount of one floor as $2,439,094 was pledged to a promissory note
payable in Note 8.
 
 As of
June 30, 2010, the four units of the investment properties were leased to
SZBFND, a related party of the Company, and 95% of the total area of the
one remaining floor was leased out.
 
 NOTE
7 - BANK LOANS
 
 The
balance includes one bank loan of $8,099,074, which has an interest increase of
10% of one year prime rate as announced by the People’s Bank of China to 5.84%,
and is secured by the properties as mentioned in Note 6 above. The period of
this bank loan was 3 years and can be extended to the next 3 years
automatically.
 
 NOTE
8 – PROMISSORY NOTES PAYABLE
 
 There are
three promissory notes, as listed below:
 
 First,
the balance includes a promissory note of $300,000 and accrued interest of
$3,750 thereon. This promissory note of $300,000 bearing an interest rate of 15%
per annum. This promissory note is unsecured and the term of repayment is not
specifically defined.
 
 Second,
the balance includes a promissory note of $147,256. This promissory note of
$147,256 bears interest at a rate of 15% per annum. This promissory note is
unsecured and the term of repayment is not specifically defined.
 
 Third,
the balance includes a promissory note of $441,768. This promissory note of
$441,768 bears interest at a rate of 18% per annum. This promissory note is
secured by the promissory deposit of $441,767 as mentioned in Note 3 above and
one floor of the investment properties as mentioned in Note 6 above and the term
of repayment is not specifically defined.
  12
  NOTE
9 – AMOUNTS WITH RELATED PARTIES AND DIRECTORS
 
 A related
party is an entity that can control or significantly influence the management or
operating policies of another entity to the extent one of the entities may be
prevented from pursuing its own interests. A related party may also be any party
the entity deals with that can exercise that control.
 
 Amount due to
directors
 
 As of
June 30, 2010, the balance includes one loan and advances obtained from Lin
Chin-Jung.
 
 The loan
includes principal of $103,288 and accrued interest of $29,666 thereon. The
principal is unsecured, bears interest at a rate of 9.6% per annum and the term
of repayment is not specifically defined.
 
 The
advances and reimbursements of $33,133 represented the salary payable and rental
reimbursement to Lin Chin-Jung outstanding as of June 30, 2010.
 
 Amount due to related
party
 The
amount includes a rental deposit received from SZBFND. This amount is unsecured,
interest free and repayable on demand.
 
 NOTE
10 - OTHER PAYABLES AND ACCRUED EXPENSES
 
 June 30,
                  
                  
                  December 31,2010
                  
                  
                  2009Accrued
      legal fee
                  
                  $
                  242,187
                  
                  
                  $
                  0Accrued
      staff commission & bonus
                  
                  
                  905,504
                  
                  
                  $
                  694,717Rental
      deposits received
                  
                  
                  751,773
                  
                  
                  
                  596,090Accrual
      for onerous contracts
                  
                  
                  18,869
                  
                  
                  
                  39,360Other
      payables
                  
                  
                  843,665
                  
                  
                  
                  953,192Total
      other payables and accrued expense
                  
                  $
                  2,761,998
                  
                  
                  $
                  2,283,359
  NOTE
11 – OTHER TAX PAYABLE
 
 Other tax
payable mainly represents the outstanding payables of business tax, urban real
estate tax and land appreciation tax in the PRC.
 
 NOTE
12- COMMITMENTS AND CONTINGENCIES
 
 Operating Lease
Commitments
 
 During
the six months ended June 30, 2010 and 2009, the Company incurred lease expenses
amounting to $164,833 and $142,194, respectively. As of June 30, 2010, the
Company had commitments under operating leases, requiring annual minimum rentals
as follows:
 
 June 30,
                  
                  
                  December 31,2010
                  
                  
                  2009Within
      one year
                  
                  $
                  235,558
                  
                  
                  $
                  31,878Two
      to five years
                  
                  
                  84,672
                  
                  
                  
                  4,394Operating
      lease commitments
                  
                  $
                  320,230
                  
                  
                  $
                  36,272
  13
 
 During
the year of 2005 and 2006, SZGFH entered into leasing agreements with certain
buyers of the Sovereign Building underwriting project to lease the properties
for them. These leasing agreements on these properties are for 62% of the floor
space that was sold to third party buyers. In accordance with the leasing
agreements, the owners of the properties can have a rental return of 8.5% and
8.8% per annum for a period of 5 years and 8 years, respectively. In regards to
the leasing agreements, we have negotiated with the buyers and have lowered the
annual rental return rate for the remaining leasing period from 8.5% for 5
years to 5.8%, and from 8.8% for 8 years to 6%. As of June 30, 2010,
67% of the buyers agreed upon the lowered rate and 22% of the buyers agreed to
cancel the leasing agreements. The leasing period started in the second quarter,
2006, and the Company has the right to sublease the leased properties to cover
these lease commitments in the leasing period. As of June 30, 2010, 111
sub-leasing agreements have been signed, the area of these sub-leasing
agreements represented 93% of total area with these lease
commitments.
 
 As of
June 30, 2010, the lease commitments are as follows:
 
 June 30,
                  
                  
                  December 31,2010
                  
                  
                  2009Within
      one year
                  
                  $
                  1,953,603
                  
                  
                  $
                  2,141,087Two
      to five years
                  
                  
                  3,374,643
                  
                  
                  
                  4,478,477Operating
      lease commitments arising from the promotional package
                  
                  $
                  5,328,246
                  
                  
                  $
                  6,619,564
 
 An
accrual for onerous contracts was recognized which is equal to the difference
between the present value of the sublease income and the present value of the
associated lease expense at the appropriate discount rate. The accrual for
onerous contracts was $18,876 as of June 30, 2010 and $39,360as of December 31,
2009.
 
 According
to the leasing agreements, the Company has an option to terminate any agreement
by paying a predetermined compensation. As of June 30, 2010, the
compensation to terminate all leasing agreements is $1,662,135. According to the
sub-leasing agreements that have been signed through June 30, 2010, the rental
income from these sub-leasing agreements will be $ 1,257,043 within one year and
$543,024 within two to five years. However, no assurance can be given that we
can collect all of the rental income.
 
 NOTE
13 –DEPOSITS RECEIVED FROM UNDERWRTING SALES
 
 The
Company accounts for its underwriting sales revenue with underwriting rent
guarantees in accordance with the FASB ASC Topic 360. Under ASC 360, the deposit
method should be used for the revenue from the sales of floor space with
underwriting rent guarantees until the revenues generated by sub-leasing
properties exceed the guaranteed rental amount due to the
purchasers.
 
 NOTE
14 – STATUTORY RESERVE
 
 According
to the relevant corporation laws in the PRC, a PRC company is required to
transfer at least 10% of its profit after taxes, as determined under accounting
principles generally accepted in the PRC, to the statutory reserve until the
balance reaches 50% of its registered capital. The statutory reserve can be used
to make good on losses or to increase the capital of the relevant
company.
 
 NOTE
15 – ACCUMULATED OTHER COMPREHENSIVE INCOME (FIND IN PROJECT 2010
Q2)
 
 As of
June 30, 2010 and December 31, 2009, the only component of accumulated other
comprehensive income was translation reserve.
  14




NOTE
16 – CONCENTRATION OF CUSTOMERS (FIND IN PROJECT 2010 “CUSTOMER
SHEET”)





During
the three months and six months ended June 30, 2010 and 2009, the following
customers accounted for more than 10% of total net revenue:





Percentage of
                      Net Sales
                      Three Months
                      Ended June 30,
                    
                    
                    Percentage of
                      Net Sales
                      Six Months
                      Ended June 30,
                    
                    
                    Percentage of
                      Accounts Receivable
                      as of June 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Customer
      A
                    
                    
                    19
                    %
                    
                    
                    *
                    
                    
                    
                    18
                    %
                    
                    
                    *
                    
                    
                    
                    15
                    %
                    
                    
                    *Customer
      B
                    
                    
                    14
                    %
                    
                    
                    *
                    
                    
                    
                    17
                    %
                    
                    
                    *
                    
                    
                    
                    38
                    %
                    
                    
                    *Customer
      C
                    
                    
                    10
                    %
                    
                    
                    *
                    
                    
                    
                    *
                    
                    
                    
                    *
                    
                    
                    
                    *
                    
                    
                    
                    *




* less
than 10%




15




ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND RESULTS
OF OPERATIONS CAUTIONARY
STATEMENT




The
following Management’s Discussion and Analysis (“MD&A”) is intended to help
the reader understand Sunrise Real Estate Group, Inc. (“SRRE”). The MD&A is
provided as a supplement to, and should be read in conjunction with, our
financial statements and the accompanying notes. The information contained in
this quarterly report on Form 10-Q is not a complete description of our business
or the risks associated with an investment in our common stock. We urge you to
carefully review and consider the various disclosures made by us in this report
and in our other reports filed with the Securities and Exchange Commission, or
SEC, including but not limited to our annual report on Form 10-K for the year
ended December 31, 2009, which discusses our business in greater
detail.





In this
report we make, and from time to time we otherwise make, written and oral
statements regarding our business and prospects, such as projections of future
performance, statements of management’s plans and objectives, forecasts of
market trends, and other matters that are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Statements containing the words or phrases
“will likely result,” “are expected to,” “will continue,” “is anticipated,”
“estimates,” “projects,” “seeks”, “believes,” “expects,” “anticipates,”
“intends,” “target,” “goal,” “plans,” “objective,” “should” or similar
expressions identify forward-looking statements, which may appear in documents,
reports, filings with the Securities and Exchange Commission, news releases,
written or oral presentations made by officers or other representatives made by
us to analysts, stockholders, current or potential investors, news organizations
and others, and discussions with management and other of our representatives,
customer and suppliers. For such statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.





Our
future results, including results related to forward-looking statements, involve
a number of risks and uncertainties. No assurance can be given that the results
reflected in any forward-looking statements will be achieved. Any
forward-looking statement speaks only as of the date on which such statement is
made. Our forward-looking statements are based upon assumptions that are
sometimes based upon estimates, data, communications and other information from
suppliers, government agencies and other sources that may be subject to
revision. Except as required by law, we do not undertake any obligation to
update or keep current either (i) any forward-looking statement to reflect
events or circumstances arising after the date of such statement, or (ii) the
important factors that could cause our future results to differ materially from
historical results or trends, results anticipated or planned by us, or which are
reflected from time to time in any forward-looking statement.





In
addition to other matters identified or described by us from time to time in
filings with the SEC, there are several important factors that could cause our
future results to differ materially from historical results or trends, results
anticipated or planned by us, or results that are reflected from time to time in
any forward-looking statement. Some of these important factors, but not
necessarily all important factors, include those relating to our ability to
raise money and grow our business, and potential difficulties in integrating new
acquisitions with our current operations, especially as they pertain to foreign
markets and market conditions.  Please also refer to the section
entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2009.


16




OVERVIEW





In
October 2004, the former shareholders of Sunrise Real Estate Development Group,
Inc. (Cayman Islands) (“CY-SRRE”) and LIN RAY YANG Enterprise Ltd. (“LRY”)
acquired a majority of our voting interests in a share exchange. Before the
completion of the share exchange, SRRE had no continuing operations, and its
historical results would not be meaningful if combined with the historical
results of CY-SRRE, LRY and their subsidiaries.





As a
result of the acquisition, the former owners of CY-SRRE and LRY hold a majority
interest in the combined entity. Generally accepted accounting principles
require in certain circumstances that a company whose shareholders retain the
majority voting interest in the combined business be treated as the acquirer for
financial reporting purposes. Accordingly, the acquisition has been accounted
for as a “reverse acquisition” arrangement whereby CY-SRRE and LRY are deemed to
have purchased SRRE. However, SRRE remains the legal entity and the Registrant
for Securities and Exchange Commission reporting purposes. The historical
financial statements prior to October 5, 2004 are those of CY-SRRE and LRY and
their subsidiaries. All equity information and per share data prior to the
acquisition have been restated to reflect the stock issuance as a
recapitalization of CY-SRRE and LRY.




SRRE and
its subsidiaries, namely, CY-SRRE, LRY, Shanghai Xin Ji Yang Real Estate
Consultation Company Limited (“SHXJY”), Suzhou Xin Ji Yang Real Estate
Consultation Company Limited (“SZXJY”), Beijing Xin Ji Yang Real Estate
Consultation Company Limited (“BJXJY”), Shanghai Shangyang Real Estate
Consultation Company Limited (“SHSY”), Suzhou Gao Feng Hui Property Management
Company Limited (“SZGFH”), Suzhou Shang Yang Real Estate Consultation Company
Limited (“SZSY”), Suzhou Xin Ji Yang Real Estate Brokerage Company
Limited(“SZXJYB”), Kunshan Shang Yang Real Estate Brokerage Company Limited (“
KSSY”) and San Ya Shang Yang Real Estate Consultation Company Limited (“SYSY”)
are sometimes hereinafter collectively referred to as “the Company,” “our,” or
“us”.





The
principal activities of the Company are real estate agency sales, real estate
marketing services, real estate investments, property leasing services and
property management services in the PRC.





RECENT
DEVELOPMENTS





Our major
business was agency sales, whereby our Chinese subsidiaries contracted with
property developers to market and sell their newly developed property
units.  For these services we earned a commission fee calculated as a
percentage of the sales prices. We have focused our sales on the whole China
market, especially in secondary cities. To expand our agency business, we have
established subsidiaries in Shanghai, Suzhou, Beijing, Kunshan and Hainan, and
branches in NanChang, YangZhou, NanJing, ChongQing and ChengDu.





During
the year of 2005 and 2006, SZGFH entered into leasing agreements with certain
buyers of the Sovereign Building underwriting project to lease the properties
for them. These leasing agreements on these properties are for 62% of the floor
space that was sold to third party buyers. In accordance with the leasing
agreements, the owners of the properties can have a rental return of 8.5% and
8.8% per annum for a period of 5 years and 8 years, respectively. In regards to
the leasing agreements, we have negotiated with the buyers and have lowered the
annual rental return rate for the remaining leasing period from 8.5% for 5
years to 5.8%, and from 8.8% for 8 years to 6%. As of June 30, 2010,
67% of the buyers agreed upon the lowered rate and 22% of the buyers agreed to
cancel the leasing agreements. The leasing period started in the second quarter
of 2006, and the Company has the right to sublease the leased properties to
cover these lease commitments in the leasing period. As of June 30, 2010, 111
sub-leasing agreements have been signed, the area of these sub-leasing
agreements represented 93% of total area with these lease
commitments.


17




RECENTLY
ISSUED ACCOUNTING STANDARDS





In
January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires new disclosures on the transfers of assets and liabilities between
Level 1 (quoted prices in active market for identical assets or liabilities) and
Level 2 (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the
transfers. Additionally, the guidance requires a roll forward of activities
on purchases, sales, issuance, and settlements of the assets and liabilities
measured using significant unobservable inputs (Level 3 fair value
measurements). The guidance became effective for us with the reporting period
beginning January 1, 2010, except for the disclosure on the roll forward
activities for Level 3 fair value measurements, which will become effective for
us with the reporting period beginning July 1, 2011. Other than requiring
additional disclosures, adoption of this new guidance did not have a material
impact on our financial statements.





We
adopted guidance issued by the FASB that changes the accounting and reporting
for non-controlling interests. Non-controlling interests are to be reported as a
component of equity separate from the parent’s equity, and purchases or sales of
equity interests that do not result in a change in control are to be accounted
for as equity transactions. In addition, net income attributable to a
non-controlling interest is to be included in net income and, upon a loss of
control, the interest sold, as well as any interest retained, is to be recorded
at fair value with any gain or loss recognized in net income. Adoption of the
new guidance did not have a material impact on our financial
statements.





In June
2009, the FASB issued guidance on the consolidation of variable interest
entities, which is effective for us beginning July 1, 2010. The new
guidance requires revised evaluations of whether entities represent variable
interest entities, ongoing assessments of control over such entities, and
additional disclosures for variable interests. We believe adoption of this new
guidance will not have a material impact on our financial
statements.





In May
2009, the FASB Issued guidance on accounting for and disclosure of subsequent
events. The objective of this guidance is to establish general standards of
accounting and disclosure of events after the balance sheet date but before
financial statements are issued or are available to be issued.





The
Company does not anticipate that adoption of the above guidance will have a
material effect on the Company’s financial condition and results of
operations.





APPLICATION
OF CRITICAL ACCOUNTING POLICIES





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Critical accounting policies for us include revenue
recognition, net earnings per common share, income taxes and segment
information.





Revenue
Recognition





Agency
commission revenue from property brokerage is recognized when the property
developer and the buyer complete a property sales transaction, and the property
developer grants confirmation to us to be able to invoice them accordingly. The
time when we receive the commission is normally at the time when the property
developer receives from the buyer a portion of the sales proceeds in accordance
with the terms of the relevant property sales agreement, or the balance of the
bank loan to the buyer has been funded, or recognized under the sales schedule
or other specific items of agency sales agreement with developer. At no point
does the Company handle any monetary transactions nor act as an escrow
intermediary between the developer and the buyer.





Revenue
from marketing consultancy services is recognized when services are provided to
clients, fees associated to services are fixed or determinable, and collection
of the fees is assured.





Rental
revenue from property management and rental business is recognized on a
straight-line basis according to the time pattern of the leasing
agreements.


18




The
Company accounts for underwriting sales in accordance with the FASB guidance of
ASC Topic 360, “Property, Plant and Equipment”. The commission revenue on
underwriting sales is recognized when the criteria in ASC 360 have been met,
generally when title is transferred and the Company no longer has substantial
continuing involvement with the real estate asset sold. If the Company provides
certain rent guarantees or other forms of support where the maximum exposure to
loss exceeds the gain, it defers the related commission income and expenses by
applying the deposit method. In future periods, the commission income and
related expenses are recognized when the remaining maximum exposure to loss is
reduced below the amount of income deferred.





All
revenues represent gross revenues less sales and business tax.





Net
Earnings per Common Share





The
Company computes net earnings per share in accordance with the FASB guidance of
ASC Topic 260, “Earnings per Share.” Under the provisions of ASC Topic 260,
basic net earnings per share is computed by dividing the net earnings available
to common shareholders for the period by the weighted average number of shares
of common stock outstanding during the period. The calculation of diluted net
earnings per share recognizes common stock equivalents, however; potential
common stock in the diluted EPS computation is excluded in net loss periods, as
their effect is anti-dilutive.





Income
Taxes





The
Company accounts for income taxes in accordance with the FASB ASC Topic 740
“Income Taxes.” Under ASC Topic 740, deferred tax liabilities or assets at the
end of each period are determined using the tax rate expected to be in effect
when taxes are actually paid or recovered. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.





We
continue to account for income taxcontingencies using a
benefit recognition model.Beginning January 1,
2007, if we considered that a tax position is 'more likely than not' of being
sustained upon audit, based solely on the technical merits of the position, we
recognize the benefit. We measure the benefit by determining the amount that is
greater than 50% likely of being realized upon settlement, presuming that the
tax position is examined by the appropriate taxing authority that has full
knowledge of all relevant information. These assessments can be complex and we
often obtain assistance from external advisors.





Under the
benefit recognition model, if our initial assessment fails to result in the
recognition of a tax benefit, we regularly monitor our position and subsequently
recognize the tax benefit if there are changes in tax law or analogous case law
that sufficiently raise the likelihood of prevailing on the technical merits of
the position to more likely than not; if the statute of limitations expires; or
if there is a completion of an audit resulting in a settlement of that tax year
with the appropriate agency.





Uncertain
tax positions, represented by liabilities on our balance sheet, are now
classified as current only when we expect to pay cash within the next 12 months.
Interest and penalties, if any, continue to be recorded in Provision for taxes
on income and are classified on the balance sheet with the related tax
liability.





Historically,
our policy had been to account for income tax contingencies based on whether we
determined our tax position to be 'probable' under current tax law of being
sustained, as well as an analysis of potential outcomes under a given set of
facts and circumstances. In addition, we previously considered all tax
liabilities as current once the associated tax year was under
audit.





Segment
Information





The
Company believes that it operates in one business segment. Management views the
business as consisting of several revenue streams; however it is not possible to
attribute assets or indirect costs to the individual streams other than direct
expenses.


19





RESULTS
OF OPERATIONS





We
provide the discussion and analysis of our changes in financial condition and
results of operations for the three and six months ended June 30, 2010, with
comparisons to the historical three and six months ended June 30,
2009.





Revenue





The
following table shows the net revenue detail by line of business:





Three Months Ended June 30,
                    
                    
                    
                    Six Months Ended June 30,2010
                    
                    
                    % to
                      total
                    
                    
                    2009
                    
                    
                    % to
                      total
                    
                    
                    %
                      change
                    
                    
                    
                    2010
                    
                    
                    
                    % to
                      total
                    
                    
                    
                    2009
                    
                    
                    
                    % to
                      total
                    
                    
                    
                    %
                      changeAgency
      Sales
                    
                    
                    1,882,031
                    
                    
                    
                    64
                    
                    
                    
                    957,581
                    
                    
                    
                    54
                    
                    
                    
                    97
                    
                    
                    
                    
                    5,653,952
                    
                    
                    
                    
                    74
                    
                    
                    
                    
                    1,685,295
                    
                    
                    
                    
                    52
                    
                    
                    
                    
                    235Underwriting
      Sales
                    
                    
                    405,862
                    
                    
                    
                    14
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    N/A
                    
                    
                    
                    
                    716,607
                    
                    
                    
                    
                    9
                    
                    
                    
                    
                    0
                    
                    
                    
                    
                    0
                    
                    
                    
                    
                    N/AProperty Management
                    
                    
                    655,022
                    
                    
                    
                    22
                    
                    
                    
                    802,400
                    
                    
                    
                    46
                    
                    
                    
                    (18
                    )
                    
                    
                    
                    1,271,875
                    
                    
                    
                    
                    17
                    
                    
                    
                    
                    1,570,214
                    
                    
                    
                    
                    48
                    
                    
                    
                    
                    (19
                    )Net
      revenue
                    
                    
                    2,942,915
                    
                    
                    
                    100
                    
                    
                    
                    1,759,981
                    
                    
                    
                    100
                    
                    
                    
                    67
                    
                    
                    
                    
                    7,642,434
                    
                    
                    
                    
                    100
                    
                    
                    
                    
                    3,255,509
                    
                    
                    
                    
                    100
                    
                    
                    
                    
                    135





The net
revenue  in the second quarter of 2010 was $2,942,915, which increased 67%
from $1,759,981 in the second quarter of 2009. The total net revenue of the
first two quarters of 2010 was $7,642,434, which increased 135%
from $3,255,509 of the first two quarters of 2009. In the second quarter of
2010, agency sales represented 64% of the total net revenue, underwriting sales
represented 14% and property management represented 22%. In the first two
quarters of 2010, agency sales represented 74% of the total net revenue,
underwriting sales represented 9% and property management represented 17%. The
increase in net revenue in the second quarter and first two quarters of 2010 was
due to the increase in our agency sales and underwriting sales .





Agency
sales





In the
second quarter and first two quarters of 2010, 64% and 74%, respectively, of our
net revenue was due to agency sales. As compared with same period in 2009, net
revenue of agency sales in the second quarter and first two quarters of 2010
increased 97% and 235% respectively. The primary reason was there were two
projects that were major contributors to the increase in our agency sales
revenue.  Such projects contributed $1,090,022 to the agency sales
revenue in the second quarter of 2010 and $2,791,966 to the agency sales revenue
in six months ending June 30, 2010.





Because
of our diverse market locations, the risk of market fluctuations has been
minimized on our business operations in agency sales in 2010, and we are seeking
stable growth in our agency sales business in 2010. However, there can be no
assurance that we will be able to do so.





Underwriting
Sales





In
February 2004, SHSY entered into an agreement to underwrite an office building
in Suzhou, known as Suzhou Sovereign Building. Being the sole distribution agent
for this office building, SHSY committed to a sales target of $56.53 million.
Property underwriting sales are comparatively a higher risk business model
compared to our pure commission based agency business. Under this higher risk
business model, the Underwriting Model, our commission is not calculated as a
percentage of the selling price; instead, our commission revenue is equivalent
to the price difference between the final selling price and underwriting price.
We negotiate with a developer for an underwriting price that is as low as
possible, with the guarantee that all or a majority of the units will be sold by
a specific date. In return, we are given the flexibility to establish the final
selling price and earn the price difference between the final selling price and
the underwriting price. The risk of this kind of arrangement is that if there
are any unsold units on the expiration date of the agreement, then we may have
to purchase the unsold property units from the developer at the underwriting
price and hold them in our inventory or as investments.


20





We
started selling units in the Sovereign Building in January, 2005. As of December
31, 2006, we have achieved the sales target by selling 46,779 square meters with
a total sales price of $70.45 million. However, there are still unsold
properties with floor area of 314 square meters, which represents 1% of total
floor area underwritten, as of December 31, 2006. As of the end of February,
2007, we have sold or acquired all of the units in the building, and we have
achieved the sales target by selling 47,093 square meters with a total sales
price of $75.96 million.





The
Company accounts for underwriting sales in accordance with the FASB guidance of
ASC Topic 360, “Property, Plant
and Equipment”. The commission
revenue on underwriting sales is recognized when the criteria in ASC 360 have
been met, generally when title is transferred and the Company no longer has
substantial continuing involvement with the real estate asset sold. If the
Company provides certain rent guarantees or other forms of support where the
maximum exposure to loss exceeds the gain, it defers the related commission
income and expenses by applying the deposit method. In future periods, the
commission income and related expenses are recognized when the remaining maximum
exposure to loss is reduced below the amount of income deferred. In early 2009,
the Company renegotiated the rental payments with buyers. As of June 30th, 2010,
67% of the buyers agreed upon the lowered rate and 22% of the buyers agreed to
cancel the leasing agreements. Based on the renegotiated agreements, $716,607 of
the deferred revenue on underwriting sales was recognized in the first two
quarters of 2010.





Property
Management





During
the year of 2005 and 2006, SZGFH entered into leasing agreements with certain
buyers of the Sovereign Building underwriting project to lease the properties
for them. These leasing agreements on these properties are for 62% of the floor
space that was sold to third party buyers. In accordance with the leasing
agreements, the owners of the properties can have a rental return of 8.5% and
8.8% per annum for a period of 5 years and 8 years, respectively. In regards to
the leasing agreements, we have negotiated with the buyers and have lowered the
annual rental return rate for the remaining leasing period from 8.5% for 5
years to 5.8%, and from 8.8% for 8 years to 6%. As of June 30, 2010,
67% of the buyers agreed upon the lowered rate and 22% of the buyers agreed to
cancel the leasing agreements. The leasing period started in the second quarter,
2006, and the Company has the right to sublease the leased properties to cover
these lease commitments in the leasing period. As of June 30, 2010, 111
sub-leasing agreements have been signed, the area of these sub-leasing
agreements represented 93% of total area with these lease
commitments.





We expect
that the income from the sub-leasing business will be on a stable growth trend
in 2010 and that it can cover the lease commitments in the leasing period as a
whole. However there can be no assurance that we will achieve these
objectives.





Cost ofRevenue





The
following table shows the cost of revenue detail by line of
business:





Three Months Ended June 30,
                  
                  
                  Six Months Ended June 30,2010
                  
                  
                  % to
                    total
                  
                  
                  2009
                  
                  
                  % to
                    total
                  
                  
                  %
                    change
                  
                  
                  2010
                  
                  
                  % to
                    total
                  
                  
                  2009
                  
                  
                  % to
                    total
                  
                  
                  %
                    changeAgency
      Sales
                  
                  
                  1,316,654
                  
                  
                  
                  63
                  
                  
                  
                  291,376
                  
                  
                  
                  27
                  
                  
                  
                  352
                  
                  
                  
                  2,575,896
                  
                  
                  
                  63
                  
                  
                  
                  536,686
                  
                  
                  
                  23
                  
                  
                  
                  380Underwriting
      Sales
                  
                  
                  94,891
                  
                  
                  
                  4
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  N/A
                  
                  
                  
                  167,554
                  
                  
                  
                  4
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  N/AProperty
      Management
                  
                  
                  694,811
                  
                  
                  
                  33
                  
                  
                  
                  785,554
                  
                  
                  
                  73
                  
                  
                  
                  (12
                  )
                  
                  
                  1,379,628
                  
                  
                  
                  33
                  
                  
                  
                  1,770,515
                  
                  
                  
                  77
                  
                  
                  
                  (22
                  )Cost
      of revenue
                  
                  
                  2,106,356
                  
                  
                  
                  100
                  
                  
                  
                  1,076,930
                  
                  
                  
                  100
                  
                  
                  
                  96
                  
                  
                  
                  4,123,068
                  
                  
                  
                  100
                  
                  
                  
                  2,307,201
                  
                  
                  
                  100
                  
                  
                  
                  79





The cost
of revenue of the second quarter of 2010 was $2,106,356, which increased 96%
from $1,076,930 of the second quarter of 2009. The total cost of revenue of the
first two quarters of 2010 was $4,123,068, which increased 79%
from $2,307,201of the first two quarters of 2009. In the second quarter of 2010,
agency sales represented 63% of the total cost of revenue, underwriting sales
represented 4%, and property management represented 33%. In the first two
quarters of 2010, agency sales represented 63% of the total cost of revenue,
underwriting sales represented 4%, and property management represented 33%. The
increased in cost of revenue in the second quarter and first two quarters of
2010 was mainly due to the increase in our agency sales while property
management cost of revenue stayed decreased by 73% and 77%
respectively.


21




Agency
sales





As
compared with same period in 2009, net revenue of agency sales in the second
quarter and first two quarters of 2010 increased 97% and 235% respectively, and
the cost of revenue in the same period increased by 352% and 380% accordingly.
This increase in cost was mainly due to the increase in our commissions and
consulting costs in the first two quarters of 2010, compared to the same period
in 2009, the increase of such expenses was $882,295 and $916,829,
respectively.





Underwriting
Sales





The cost
of underwriting sales represents selling costs, such as staff costs and
advertising expenses, associated with underwriting sales.





Property
management





During
the year of 2005 and 2006, SZGFH entered into leasing agreements with certain
buyers of the Sovereign Building underwriting project to lease the properties
for them. These leasing agreements on these properties are for 62% of the floor
space that was sold to third party buyers. In accordance with the leasing
agreements, the owners of the properties can have a rental return of 8.5% and
8.8% per annum for a period of 5 years and 8 years, respectively. In regards to
the leasing agreements, we have negotiated with the buyers and have lowered the
annual rental return rate for the remaining leasing period from 8.5% for 5
years to 5.8%, and from 8.8% for 8 years to 6%. As of June 30, 2010,
67% of the buyers agreed upon the lowered rate and 22% of the buyers agreed to
cancel the leasing agreements. The leasing period started in the second quarter,
2006, and the Company has the right to sublease the leased properties to cover
these lease commitments in the leasing period. As of June 30, 2010, 111
sub-leasing agreements have been signed, the area of these sub-leasing
agreements represented 93% of total area with these lease commitments.
We  anticipate that these properties will be leased out in 2010 and
that the gross margin will be improved. However, no assurance can be given that
this will be the case.





In
connection with our leasing guarantees to third party buyers in the Sovereign
Building, an accrual for onerous contracts was recognized equal to the
difference between the present value of the sublease income and the present
value of the associated lease expense at the appropriate discount rate. The
accrual for onerous contracts was $18,876 as of June 30, 2010 and $39,360 as of
December 31, 2009.





Operating
Expenses





The
following table shows operating expenses detail by line of
business:





Three Months Ended June 30,
                  
                  
                  Six Months Ended June 30,2010
                  
                  
                  % to
                    total
                  
                  
                  2009
                  
                  
                  % to
                    total
                  
                  
                  %
                    change
                  
                  
                  2010
                  
                  
                  % to
                    total
                  
                  
                  2009
                  
                  
                  % to
                    total
                  
                  
                  %
                    changeAgency
      sales
                  
                  
                  255,894
                  
                  
                  
                  87
                  
                  
                  
                  250,305
                  
                  
                  
                  93
                  
                  
                  
                  2
                  
                  
                  
                  593,529
                  
                  
                  
                  90
                  
                  
                  
                  397,025
                  
                  
                  
                  86
                  
                  
                  
                  49Property
      Management
                  
                  
                  37,196
                  
                  
                  
                  13
                  
                  
                  
                  17,566
                  
                  
                  
                  7
                  
                  
                  
                  112
                  
                  
                  
                  68,078
                  
                  
                  
                  10
                  
                  
                  
                  62,486
                  
                  
                  
                  14
                  
                  
                  
                  9Operating
      expenses
                  
                  
                  293,090
                  
                  
                  
                  100
                  
                  
                  
                  267,871
                  
                  
                  
                  100
                  
                  
                  
                  9
                  
                  
                  
                  661,607
                  
                  
                  
                  100
                  
                  
                  
                  459,511
                  
                  
                  
                  100
                  
                  
                  
                  44





The
operating expenses of the second quarter of 2010 were $293,090, which increased
9% from $267,871 of the second quarter of 2009. The total operating expenses of
the first two quarters of 2010 were $661,607, which increased 44% from $459,511
in the first two quarters of 2009. In the second quarter of 2010, agency sales
represented 87% of the total operating expenses and property management
represented 13%. In the first two quarters of 2010, agency sales represented 90%
of the total operating expenses and property management represented 10%. This
increase in operating expense in the second quarter was due to the increase in
our property management. In addition, the increase in operating expenses in
connection with agency sales for the six months ended June 30, 2010 was
attributable to the increase in revenue of agency sales.


22




Agency
sales





When
compared to 2009, the operating expenses for agency sales in the second quarter
and first two quarters of 2009 increased 2% and 49% respectively. The primary
reason for the change was that in the first two quarters of 2010, our staff cost
and consulting expense increased $47,908 and $120,297 compared to the same
period in 2009.





Property
management





When
compared to 2009, the operating expenses for property management in the second
quarter of 2010 increased 112%. The primary reason for the change was that in
the second quarter of 2010, our consulting expense increased $11,727, compared
to the same period in 2009.





General and Administrative
Expenses





General
Administrative Expense increased for the first two quarters in 2010 as compared
to 2009 by 3%. The main reason for the increase in the first two quarters in
2010 was the increase in our staff cost, which increased $97,294 compared to the
same period in 2009.





Interest
Expenses





When
compared to 2009, the interest expenses in the second quarter and first two
quarters of 2010 increased 29% and 15% respectively. The interest expenses
relate to bank loans and promissory notes payable.





LIQUIDITY
AND CAPITAL RESOURCES





In 2010,
our principal sources of cash were revenues from our agency sales and property
management business. Most of our cash resources were used to fund our revenue
related expenses, such as salaries and commissions paid to the sales force,
daily administrative expenses and the maintenance of regional offices, and the
repayments of our bank loans and promissory notes.





We ended
the period with a cash position of $2,295,101.





The
Company's operating activities used cash in the amount of $387,003, which was
primarily attributable to the increase of our accounts receivables.





The
Company's investing activities used cash resources of $430,779, which was
primarily attributable to the acquisition of property, plant and
equipment.





The
Company's financing activities used cash resources of $474,080, which was
primarily attributable to the repayment of bank loan and promissory
notes.





The
potential cash needs for 2010 will be the repayments of our bank loans and
promissory notes, the rental guarantee payments and promissory deposits for
various property projects.





If our
business otherwise grows more rapidly than we currently predict, we plan to
raise funds through the issuance of additional shares of our equity securities
in one or more public or private offerings. We will also consider raising funds
through credit facilities obtained with lending institutions. There can be no
guarantee that we will be able to obtain such funds through the issuance of debt
or equity that are with terms satisfactory to management and our board of
directors.





OFF BALANCE SHEET
ARRANGEMENTS





The
Company has no off-balance sheet arrangements.


23





ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





A smaller
reporting company is not required to provide the information required by this
item.




ITEM
4.  CONTROLS AND PROCEDURES





Our Chief
Executive Officer and our Chief Financial Officer have evaluated the
effectiveness of our disclosure controls and procedures as of June 30, 2010.
Based on this evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that the Company's disclosure controls and procedures
were effective at June 30, 2010, to ensure that information required to be
disclosed in reports that we file or submit under the Securities Exchange Act of
1934 is recorded, processed, summarized, and reported within the time periods
specified in Securities and Exchange Commission rules and forms. There were no
changes in our internal controls over financial reporting during the quarter
ending June 30, 2010, that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial
reporting.


24


PART
II - OTHER INFORMATION




ITEM
1.   LEGAL PROCEEDINGS





The
Company is not a party to any legal proceedings of a material
nature.





ITEM
2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





None.





ITEM
3.   DEFAULTS UPON SENIOR SECURITIES





None.





ITEM
4.   (REMOVED AND RESERVED)





ITEM
5.   OTHER INFORMATION





None.




ITEM
6.   EXHIBITS




ExhibitNumber
            
            Description31.1
            
            Section
      302 Certification by the Corporation's Chief Executive
      Officer.31.2
            
            Section
      302 Certification by the Corporation's Chief Financial
      Officer.32.1
            
            Section
      1350 Certification by the Corporation's Chief Executive Officer and
      Corporation's Chief Financial
Officer.





SIGNATURES




In
accordance with the requirements of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.




SUNRISE
REAL ESTATE GROUP, INC.





Date: August 19,2010
                    By:
                    /s/
      Lin, Chi-JungLin,
      Chi-Jung, Chief Executive OfficerDate:
      August 19,2010
                    By:
                    /s/
      Wang Wen-YanWang
      Wen-Yan, Chief Financial
Officer




25